Canadian processors may benefit from tax incentives

By: Michael Lauzon

March 22, 2013

TORONTO -- Canada's extension of its accelerated capital cost allowance write-off might help with plastics machinery purchases but it's not a slam dunk, machinery suppliers said in March 22 interviews.

Canada's new budget released by Federal Finance Minister Jim Flaherty on March 21 will extend accelerated writeoffs for machinery and equipment for another two years. Flaherty estimated the program over the last four years cost about C$1.4 billion (US$1.37 billion) in foregone federal revenues. The feds introduced the program in 2007.

Flaherty said more than 25,000 manufacturers in Canada have taken advantage of the writeoff program.

"It won't hurt but it won't accelerate anything," said Engel Canada Inc. General Manager Steve Elliot in a telephone interview from Engel Canada's head office in Guelph, Ontario. "People buy machinery because they need it."

Elliot explained tax incentives are not usually enough to entice investment in machinery. Machine sales have improved in the current economy because customers are making more parts, a reflection of recovery in the general economy.

Glen Billinger, owner of machinery and equipment distributor Plastics Machinery Inc. of Newmarket, Ontario, said accelerated writeoffs could be a help. Other aspects of the budget could benefit the industry if conditions are right.

Ottawa is reforming its training budget to stress trades skills, which are in short supply in Canada. Billinger said that could help the plastics sector but for it to work there has to be a stronger industry ready to hire skilled workers.

Billinger said a notable part of the budget calls for higher tariffs on imports from more than 70 countries, including China, which have had favorable import duties under the General Preferential Tariff. Billinger said the tariffs will help level the playing field for Canadian firms against low-wage areas like China.

Canada's new budget overall focus is on holding spending in line and capitalizing on a growing economy to cut the country's deficit to zero in 2015. The federal deficit now is C$25.9 billion (US$25.25 billion).